Case studies

It was early 2015 and executives in iShares' Factor Strategies Group were considering the launch of a new class of exchange-traded funds (ETFs) called smart beta funds. Specifically, the group was considering smart beta multifactor ETFs that would provide investors with simultaneous exposure to four fundamental factors that had shown themselves historically to be significant in driving stock returns: the stock market value of a firm, the relative value of a firm's financial position, the quality of a firm's financial position, and the momentum of a firm's stock price. The executives at iShares were unsure whether there would be demand in the marketplace for such multifactor ETFs, since their value added from an investor's portfolio perspective was unknown. Students will act as researchers for iShares' Factor Strategies Group and conduct detailed analysis of Fama and French's five-factor model and the momentum effect, smart beta ETFs including multifactor ETFs, and factor investing with smart beta ETFs to help iShares make its decision.

In this case, lessons from the Chicago Benchmarking Collaborative illustrate key principles of collaborative action and the importance of using data to achieve SMART goals.

In 2015, the Chicago Benchmarking Collaborative (CBC) was a network of seven agencies in Chicago, Illinois, serving 12,000 low-income residents. Each of the agencies had early childhood, school-age children, and adult education programs. At the prompting of the Chicago Community Trust, they came together to (1) benchmark their education programs outputs and outcomes; (2) learn and share best practices through developing a common set of metrics and measurements and implementing these measurements into a case management software system; and (3) share the costs of the case management software system to be used for program evaluation and continuous quality improvement.

Three aspects of CBC are particularly noteworthy. First, there are no joint program activities or clients among these agencies. Their exchange is limited to sharing data and other information. This makes CBC distinct from collaborations formed to begin a program or to advocate for a policy. Second, the group requires each agency to enter data on a timely basis and to set SMART goals based on the data reports. The agencies are held mutually accountable for their work to achieve their own SMART goals during the year and report on progress. Third, CBC used monetary incentives to ensure that data entry and SMART goal action remained a priority for each agency.

Alice Monroe, a 30-year-old married mother of two, was an admissions officer at the Kellogg School of Management at Northwestern University. She was just completing her first year of service at Northwestern and qualified for the university's 403(b) retirement plan. It was early October 2017, and she had until the end of the month to decide if and to what extent she would participate in Northwestern's retirement plan–that is, how much of her salary should she put into the retirement plan, and into which mutual fund or funds should she allocate her savings?

The case includes background on defined contribution and benefit plans as well as mutual funds. It goes into detail about Northwestern's retirement plan, including data on the performance of 15 of the plan's core mutual funds. The case also provides each fund's strategy, Morningstar Rating and Morningstar Category, expense ratio, assets under management, turnover rate, and historical performance for the last 10 years.

Using modern portfolio theory (diversification and risk-return trade-off) and with an understanding of mutual fund fees and the tax advantages of retirement savings, students will decide how much Alice should invest and in which mutual funds.

Alice Monroe was an admissions officer at the Kellogg School of Management at Northwestern University. It was early January 2017 and Alice had enrolled in Northwestern's 403(b) retirement plan two months earlier. After spending a considerable amount of time examining the mutual funds available through the university's retirement plan, Alice had picked two to invest in: a large-cap equity growth fund and a mid-cap equity fund. (See the related case "Selecting Mutual Funds for Retirement Accounts (A).") Her initial allocations were 50% of her investment dollars in each fund.

Upon further reflection, however, she realized these initial allocations were somewhat simplistic. She recalled, from an investments class she had taken at college, the topic of modern portfolio theory, which held that by adding more funds to her portfolio she might be able to achieve greater diversification and thereby reduce the overall risk of her portfolio and/or achieve a higher expected return. Alice now was considering adding an intermediate-term bond fund and a real estate fund to her retirement account.

She hoped to use modern portfolio theory to prove that these new funds would indeed help her diversify her portfolio. If they did, she would also reassess her portfolio weights to determine the optimal allocation.

James, a financial advisor at Bank Private, is advising a high net worth client with $1 million to invest. Bank Private can offer an investment that returns a fixed rate of 5.5% (compounded annually) for twenty years. James needs to prepare financial projections for the client that include annual interest and annual taxes as well as total interest and total taxes.

The case traces the development of the Under Armour (UA) brand, product, and market growth under CEO and founder Kevin Plank from its inception in 1996 through 2016. UA provides a cohesive case study of how to launch and sustain a consumer brand even in the face of its third-party manufacturing approach, which gives its apparel no patentable design or fabric technologies. The case uses UA's brand and advertising development as a backdrop for the current pivotal issue of how to target women to sustain growth. UA's stated goal is to build a $1.9 billion women's business by 2019.

In laying out UA's growth and competitive moves, the case lets students analyze broadcast, social media, and other digital advertising campaigns in view of the company's brand development and strategic targeting. The case also highlights the importance of leveraging brand heritage and historical differentiation while respecting key nuances when extending into new markets (i.e., moving from a predominantly male-driven audience to female). It also allows an exploration of how to use consumer insight and broader cultural attitudes and trends to support extending a position into new markets.

In 2010, Salil Pande founded VMock, an online product that helped MBA students prepare for job interviews. Students could upload their video interviews and get feedback from mentors and peers. Four years later, VMock pivoted from an interview feedback product to a “Smart Resume” product that focused on improving resumes. The pivot was based on the insight that job candidates first needed help fixing their resumes before they could obtain and prepare for interviews. Further, the interview feedback product was difficult to scale as it relied on human feedback. The Smart Resume product, on the other hand, was powered by machine learning and artificial intelligence technology, making it more scalable and allowing VMock to evolve its offering from a product to a platform for managing careers. VMock had forged strong relationships with top business schools in the United States and Europe and its Smart Resume platform had been well received by the market.

Now Salil and his wife (and head of product development), Kiran, had to determine the next step in the company's evolution. They realized that the time had come to take their business to the next level. But they were faced with several options on how to go about scaling VMock. Should they market directly to consumers or should they use partners to scale their user base? Should they create a solution for employers to help them recruit and manage talent? What revenue streams should they focus on to maximize growth and profitability? These strategic decisions would be key to the survival and growth of VMock.

In mid-2012, after successful years in large public companies and obtaining an MBA, middle daughter Jen, 32, is trying to decide whether the time is right for her to enter her mother and sister's small family business to grow it further. Destira, Inc. was a designer/manufacturer of gymnastics wear for girls, headquartered in California. Donna Levy founded the company in 1990, after years of making leotards for her three daughters, who were competitive youth gymnasts, and getting requests from other parents to make the garments for their own children. In 2005, when Donna's oldest daughter, Jodi, joined Destira, Donna gave her a 50 percent equity stake. Between then and year-end 2011, the pair grew the revenues from $550,000 to $1.06 million, increased the number of outlets carrying the brand, upgraded the internal accounting/operations software, and added an online direct-to-customer retail business. The case shows realistic considerations for the individual, family, and business when evaluating whether or not to commit to join the family enterprise.

In the fall of 2014, Chad Kartchner, senior manager of marketing and product management at Honeywell Aerospace (HA), pondered how technology could transform the way aircraft were maintained. He had heard a lot of buzz about cognitive analytics, an artificial intelligence term referring to the use of computer models and algorithms to simulate human thought through self-learning systems, data mining, pattern recognition, and natural language processing. The sheer volume of parts and the time-sensitive nature of repairs in the aviation industry made it complicated to identify problems and address them quickly.

Kartchner contemplated the options for updating HA's ground-based maintenance system. Should he emulate HA's state-of-the-art on-board system for an entire aircraft or try something new? Emulating the on-board system, which HA developed internally, would be an easy sell to leadership given internal buy-in and satisfaction with the on-board system, but he contemplated new approaches because he did not want to overlook rapidly emerging technologies. The latter could include crowdsourced features that leveraged the abundance of knowledge among HA's customers' technicians or a cognitive analytics approach. Even if he could persuade leadership to try a new cognitive analytics approach, should HA partner with an established entity or work with a relatively unproven startup who promised lower cost, better features, and quicker turnaround to develop a new system?

Students will step into the shoes of Kartchner as he leads the internal discussion on whether and how to tap into the benefits of cognitive analytic solutions for Honeywell Aerospace and its customers.

Three months into his first job as an IT consultant, newly minted MBA Phil Lee was wondering whether he had made a horrible mistake. Initially, he had been thrilled with his employer, Orion Information Technology Consulting, and the prospects for his professional future. He had specifically requested to work on projects in emerging markets, and his bosses had responded by flying him halfway around the world to New Delhi to meet with the head of procurement of a luxury property developer, Kirat Housing Development Society (KHDS). Lee thought the reason for the meeting was slightly unusual: Orion was planning to make a bid to supply building management software for KHDS's newest luxury tower, and this meeting would be the “pre-bid” negotiation. Lee wasn't totally sure what they'd even be discussing, as the tender already provided full details on exactly what modules would be required and even included specific penalty clauses for delays.

The meeting at KHDS seemed ordinary at first, but quickly took a turn when the assistant to the head of procurement explained that Orion would win the bid if it offered him a $200,000 contract as an “independent consultant.” Lee was stunned. To make matters worse, when he returned to his hotel room he found a gift waiting for him: an expensive-looking diamond pendant.

On his sleepless flight home, Lee's mind raced. Had his bosses known this would happen? Were bribes standard operating procedure? Now that he'd accepted a gift, was he complicit in wrongdoing? Lee didn't want to get fired, but he wasn't sure he could go along with this.